NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to six classes of Velocity Commercial Capital Loan Trust 2018-1 (VCC 2018-1) mortgage-backed certificates.
VCC 2018-1 is a $186.1 million securitization collateralized by 578 commercial loans secured by mortgages on 578 small balance residential rental and commercial real estate (CRE) properties. The pool consists of adjustable-rate, full recourse loans, all of which fully amortize over their respective terms. The weighted average appraisal loan-to-value ratio (LTV) and FICO score for the pool are 61.7% and 707, respectively.
The underlying properties are located in or near 97 Core Based Statistical Areas (CBSAs) across 34 states and the District of Columbia. The top-three CBSAs represent 55.0% of the portfolio and include New York-Newark-Jersey City, NY-NJ (35.1%), Los Angeles-Long Beach-Anaheim, CA (11.9%), and Miami-Fort Lauderdale-West Palm Beach, FL (7.7%). The three largest state exposures account for 59.9% of the portfolio and consist of New York (28.2%), California (20.5%), and Florida (11.1%).
The residential assets are comprised of 1-4 unit rental properties (349 assets, 48.7% of the aggregate pool balance). The commercial properties are largely comprised of mixed use (66 assets, 25.7% of CRE), retail (42 assets, 20.7%), multifamily (47 assets, 17.7%), and office (45 assets, 16.8%) properties. The remaining commercial properties (29 assets, 19.1% of CRE) include industrial/warehouse, auto service centers, and manufactured housing properties. The loans have principal balances that range from $63,493 (0.03%) to $2.7 million (1.5%), with an average of $322,013.
KBRA relied on its RMBS and CMBS methodologies to analyze the transaction based on the nature of the collateral, including its size, and the scope of information available. In doing so KBRA divided the pool into two distinct loan groups to which we applied a residential (sub-pool 1, 349 loans, 48.7% of the total pool balance) and commercial (sub-pool 2, 229 loans, 51.3%) analysis, respectively. KBRA determined losses at each rating category for each of the sub-pools, assuming a straight sequential payment structure, which were combined to reflect the quality of the collateral, diligence, and information quality relative to typical RMBS and CMBS transactions. The losses were subsequently incorporated into our cash flow modeling, which was used to evaluate the transaction’s credit enhancement levels in the context of its modified pro rata structure.
For complete details on the analysis, please see our pre-sale report, Velocity Commercial Capital 2018-1 published today at www.kbra.com. The preliminary ratings are based on information known to KBRA at the time of publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.
Preliminary Ratings Assigned: VCC 2018-1
| Liability Structure | ||||||||||||
| Class | Initial Class Balance | Subordination | Expected KBRA Rating |
Rated Final Distribution Date |
||||||||
| A | $117,909,000 | 36.65% | AAA (sf) | April 2048 | ||||||||
| M-1 | $21,776,000 | 24.95% | AA (sf) | April 2048 | ||||||||
| M-2 | $8,748,000 | 20.25% | A (sf) | April 2048 | ||||||||
| M-3 | $8,841,000 | 15.50% | BBB (sf) | April 2048 | ||||||||
| M-4 | $6,514,000 | 12.00% | BB (sf) | April 2048 | ||||||||
| M-5 | $3,722,000 | 10.00% | B (sf) | April 2048 | ||||||||
| M-6 | $9,306,000 | 5.00% | NR | N/A | ||||||||
| M-71,2 | $9,307,554 | 0.00% | NR | N/A | ||||||||
| XS2 | $186,123,6543 | N/A | NR | N/A | ||||||||
| 1 | The Class M-7 certificates are principal-only and are not entitled to receive distributions of interest. In addition, this class is expected to be retained by the loan seller or a majority-owned affiliate in satisfaction of the US risk retention rules. The loan seller is also retaining the Class M-7 certificates in satisfaction of the EU risk retention requirements. | |
| 2 | This class is expected to be retained by the loan seller or a majority-owned affiliate in satisfaction of the US risk retention rules. In addition, the Class P certificates, which are entitled only to prepayment premiums, will also be retained by the loan seller or a majority-owned affiliate in satisfaction of the US risk retention requirements. | |
| 3 | Initial notional balance equal to the aggregate cut-off date balance of the mortgage loans. |
Representations & Warranties Disclosure
All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report available here.
Related Publications: (available at www.kbra.com)
- Velocity Commercial Capital Loan Trust 2018-1 Pre-Sale ReportU.S. RMBS Rating Methodology
- Residential Mortgage Default and Loss Model
- CMBS Property Evaluation Methodology
- U.S. CMBS Multi-Borrower Rating Methodology
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About KBRA and KBRA Europe
KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
